Pursuant to authority granted by the Indian Mineral Leasing Act
of 1938 (1938 Act), the Jicarilla Apache Tribe (Tribe) leased lands
on its New Mexico reservation to appellant Cotton Petroleum Corp.
(Cotton), a non-Indian company, for the production of oil and gas.
Cotton's on-reservation production is subject to both a 6% tribal
severance tax and appellee State's 8% severance taxes, which apply
to all producers throughout the State. In 1982, Cotton paid its
state taxes under protest, and then brought an action in state
court under,
inter alia, the Commerce Clause of the
Federal Constitution, contending that the state taxes were invalid
on the basis of evidence tending to prove that the amount of such
taxes imposed on reservation activity far exceeded the value of
services the State provided in relation to such activity. The Tribe
filed a brief
amicus curiae arguing that a decision
upholding the state taxes would substantially interfere with the
Tribe's ability to raise its own tax rates and would diminish the
desirability of on-reservation leases. The trial court upheld the
state taxes, concluding, among other things, that the State
provides substantial services to both the Tribe and Cotton, that
the theory of public finance does not require that expenditures
equal revenues, that the taxes' economic and legal burden falls on
Cotton and has no adverse impact on tribal interests, and that the
taxes are not preempted by federal law. The State Court of Appeals
affirmed. This Court noted probable jurisdiction and invited the
parties to brief and argue the additional question whether the
Commerce Clause requires a tribe to be treated as a "State" for
purposes of determining whether a state tax on nontribal activities
conducted on a reservation must be apportioned to account for taxes
the tribe imposed on the same activity.
Held: The State may validly impose severance taxes on
the same on-reservation production of oil and gas by non-Indian
lessees as is subject to the Tribe's own severance tax. Pp.
490 U. S.
173-193.
(a) Under this Court's modern decisions, on-reservation oil and
gas production by non-Indian lessees is subject to
nondiscriminatory state taxation unless Congress has expressly or
impliedly acted to preempt the state taxes.
See, e.g.,
Helvering v. Mountain Producers Corp., 303 U.
S. 376,
303 U. S.
386-387. Pp.
490 U. S.
173-176.
Page 490 U. S. 164
(b) The state taxes in question are not preempted by federal
law, even when it is given the most generous construction under the
relevant preemption test, which is flexible and sensitive to the
particular facts and legislation involved and requires a
particularized examination of the relevant state, federal, and
tribal interests, including tribal sovereignty and independence.
The 1938 Act neither expressly permits nor precludes state
taxation, but simply authorizes the leasing for mining purposes of
Indian lands. Moreover, that Act's legislative history sheds little
light on congressional intent. The statement therein that
preexisting law was inadequate to give Indians the greatest return
for their property does not embody a broad congressional policy of
maximizing tribes' revenues without regard to competing state
interests, but simply suggests that Congress sought to remove
disadvantages in mineral leasing on Indian lands that were not
present with respect to public lands, which were, at the time,
subject to state taxation.
Montana v. Blackfeet Tribe,
471 U. S. 759,
471 U. S. 767,
n. 5, distinguished. The fact that the 1938 Act's statutory
predecessor expressly waived immunity from state taxation of oil
and gas lessees on reservations demonstrates that there is no
history of tribal independence from such taxation, while the 1938
Act's omission of that waiver simply reflects congressional
recognition that this Court's intervening decisions had repudiated
the preexisting doctrine of intergovernmental tax immunity, under
which such state taxation was barred absent express congressional
authorization.
White Mountain Apache Tribe v. Bracker,
448 U. S. 136, and
Ramah Navajo School Bd., Inc. v. Bureau of Revenue of New
Mexico, 458 U. S. 832, are
distinguished on the ground that, here, the State provides
substantial services to the Tribe and Cotton that justify the tax;
the tax imposes no economic burden on the Tribe; and federal and
tribal regulation is not exclusive, since the State regulates the
spacing and mechanical integrity of on-reservation wells. Pp.
490 U. S.
176-187.
(c) There is no merit to Cotton's contention that the State's
severance taxes -- insofar as they are imposed without allocation
or apportionment on top of tribal taxes -- impose an unlawful
multiple tax burden on interstate commerce. The fact that the State
and Tribe tax the same activity is not dispositive, since each of
those entities has taxing jurisdiction over the non-Indian wells by
virtue of the location of Cotton's leases entirely on reservation
lands within a single State. That the total tax burden on Cotton is
greater than the burden on off-reservation producers is also not
determinative, since neither taxing jurisdiction's tax is
discriminatory, and the burdensome consequence is entirely
attributable to the fact of concurrent jurisdiction. The argument
that the state taxes generate revenues that far exceed the value of
the State's on-reservation services
Page 490 U. S. 165
is also rejected. Moreover, there is no constitutional
requirement that the benefits received from a taxing authority by
an ordinary commercial taxpayer -- or by those living in the
taxpayer's community -- must equal the amount of its tax
obligations. Pp.
490 U. S.
187-191.
(d) The express language, distinct applications, and judicial
interpretation of the Interstate Commerce and Indian Commerce
Clauses establish that Indian tribes may not be treated as "States"
for tax apportionment purposes. Pp.
490 U. S.
191-193.
106 N.M. 517,
745 P.2d
1170, affirmed.
STEVENS, J., delivered the opinion of the Court, in which
REHNQUIST, C.J., and WHITE, O'CONNOR, SCALIA, and KENNEDY, JJ.,
joined. BLACKMUN, J., filed a dissenting opinion, in which BRENNAN
and MARSHALL, JJ., joined,
post, p.
490 U. S.
193.
Page 490 U. S. 166
JUSTICE STEVENS delivered the opinion of the Court.
This case is a sequel to
Merrion v. Jicarilla Apache
Tribe, 455 U. S. 130
(1982), in which we held that the Jicarilla Apache Tribe (Tribe)
has the power to impose a severance tax on the production of oil
and gas by non-Indian lessees of wells located on the Tribe's
reservation. We must now decide whether the State of New Mexico can
continue to impose its severance taxes on the same production of
oil and gas.
I
All 742,135 acres of the Jicarilla Apache Reservation are
located in northwestern New Mexico.
Id. at
455 U. S. 133.
In 1887, President Cleveland issued an Executive Order setting
aside this tract of public land "as a reservation for the use and
occupation of the Jicarilla Apache Indians." 1 C. Kappler, Indian
Affairs, Laws and Treaties 875 (1904). The only qualification
contained in the order was a proviso protecting bona fide settlers
from defeasance of previously acquired federal rights. [
Footnote 1]
Page 490 U. S. 167
Ibid. The land is still owned by the United States, and
is held in trust for the Tribe.
The Tribe, which consists of approximately 2,500 enrolled
members, is organized under the Indian Reorganization Act. 48 Stat.
984, 25 U.S.C. § 461
et seq. The Indian Mineral Leasing
Act of 1938 (1938 Act) grants the Tribe authority, subject to the
approval of the Secretary of the Interior (Secretary), to execute
mineral leases. 52 Stat. 347, 25 U.S.C. § 396a
et seq.
Since at least as early as 1953, the Tribe has been leasing
reservation lands to nonmembers for the production of oil and gas.
See Merrion, supra, at
455 U. S. 135.
Mineral leases now encompass a substantial portion of the
reservation, and constitute the primary source of the Tribe's
general operating revenues. In 1969, the Secretary approved an
amendment to the Tribe's Constitution authorizing it to enact
ordinances, subject to his approval, imposing taxes on nonmembers
doing business in the reservation.
See Revised
Constitution of the Jicarilla Apache Tribe, Art. XI, § 1(e)
(Equity). The Tribe enacted such an ordinance in 1976, imposing a
severance tax on "any oil and natural gas severed, saved and
removed from Tribal lands." Oil and Gas Severance Tax, Ordinance
No. 77-0-02, Jicarilla Apache Tribal Code (hereinafter J.A.T.C.),
Tit. 11, ch. 1 (1987) (Equity);
see also Merrion, supra,
at 135-136. The Secretary approved the ordinance later that year,
and in 1982 this Court upheld the Tribe's power to impose a
severance tax on preexisting as well as future leases.
See
Merrion, supra. Subsequently, the Tribe enacted a privilege
tax, which the
Page 490 U. S. 168
Secretary also approved.
See Oil and Gas Privilege Tax,
Ordinance No. 85-0-434, J.A.T.C., Tit. 11, ch. 2 (1985). [
Footnote 2]
In 1976, Cotton Petroleum Corporation (Cotton), a non-Indian
company in the business of extracting and marketing oil and gas,
acquired five leases covering approximately 15,000 acres of the
reservation. There were then 15 operating wells on the leased
acreage, and Cotton has since drilled another 50 wells. The leases
were issued by the Tribe and the United States under the authority
of the 1938 Act. Pursuant to the terms of the leases, Cotton pays
the Tribe a rent of $125 per acre, plus a royalty of 12 1/2 percent
of the value of its production. [
Footnote 3] In addition, Cotton pays the Tribe's oil and
gas severance and privilege taxes, which amount to approximately 6
percent of the value of its production. Thus, Cotton's aggregate
payment to the Tribe includes an acreage rent in excess of $1
million plus royalties and taxes amounting to about 18 1/2 percent
of its production.
Prior to 1982, Cotton paid, without objection, five different
oil and gas production taxes to the State of New Mexico. [
Footnote 4] The state taxes amount to
about 8 percent of the value of Cotton's production. The same 8
percent is collected from producers throughout the State. Thus, on
wells outside the
Page 490 U. S. 169
reservation, the total tax burden is only 8 percent, while
Cotton's reservation wells are taxed at a total rate of 14 percent
(8 percent by the State and 6 percent by the Tribe). No state tax
is imposed on the royalties received by the Tribe.
At the end of our opinion in
Merrion, 455 U.S. at
455 U. S.
158-159, n. 26, we added a footnote rejecting the
taxpayer's argument that the tribal tax was invalid as a "multiple
tax burden on interstate commerce" because imposed on the same
activity already taxed by the State. One of the reasons the
argument failed was that the taxpayer had made no attempt to show
that the Tribe was "seek[ing] to seize more tax revenues than would
be fairly related to the services provided by the Tribe."
Ibid. After making that point, the footnote suggested that
the state tax might be invalid under the Commerce Clause if in
excess of what "the
State's contact with the activity
would justify." [
Footnote 5]
Ibid. (emphasis in original).
Page 490 U. S. 170
In 1982, Cotton paid its state taxes under protest and then
brought an action in the District Court for Santa Fe County
challenging the taxes under the Indian Commerce, Interstate
Commerce, Due Process, and Supremacy Clauses of the Federal
Constitution. App. 2-15. Relying on the
Merrion footnote,
Cotton contended that state taxes imposed on reservation activity
are only valid if related to actual expenditures by the State in
relation to the activity being taxed. Record 421. In support of
this theory, Cotton presented evidence at trial tending to prove
that the amount of tax it paid to the State far exceeded the value
of services that the State provided to it, and that the taxes paid
by all nonmember oil producers far exceeded the value of services
provided to the reservation as a whole. [
Footnote 6] Cotton did not, however, attempt to prove
that the state taxes imposed any burden on the Tribe.
After trial, the Tribe sought, and was granted, leave to file a
brief
amicus curiae. Id. at 128. The Tribe argued
that a decision upholding the state taxes would substantially
interfere with the Tribe's ability to raise its own tax rates, and
would diminish the desirability of on-reservation oil and gas
leases.
Id. at 124. The Tribe expressed a particular
concern about what it characterized as a failure of the State "to
provide services commensurate with the taxes collected."
Ibid.
Page 490 U. S. 171
After the Tribe filed its brief, the New Mexico District Court
issued a decision upholding the state taxes. App. to Juris.
Statement 14. The District Court found that "New Mexico provides
substantial services to both the Jicarilla Tribe and Cotton,"
[
Footnote 7] and concluded that
the State had a valid interest in imposing taxes on non-Indians on
the reservation. [
Footnote 8]
Squarely rejecting Cotton's theory of the case, the court stated
that "[t]he theory of public finance does not require expenditures
equal to revenues."
Id. at 17. Turning to the question
whether the state taxes were inconsistent with the federal interest
in fostering the economic development of Indian tribes, the
District Court found that the "economic and legal burden of paying
the state taxes falls on Cotton or its buyers," and that "[n]o
economic burden falls on the tribe by virtue of the state taxes."
Id. at 15. More specifically, it found that the state
taxes had not affected the Tribe's ability to collect its taxes or
to impose a higher
Page 490 U. S. 172
tax, and had "not in any way deterred production of oil and gas"
on the reservation.
Id. at 16-17. It concluded that the
taxes had no adverse impact on tribal interests, and that they were
not preempted by federal law.
Id. at 17-18. Finally, the
District Court held that the taxes were fully consistent with the
Commerce and Due Process Clauses of the Federal Constitution.
Ibid.
The New Mexico Court of Appeals affirmed. 106 N.M. 517,
745 P.2d
1170 (1987). Like the District Court, it was left unpersuaded
by Cotton's contention that the New Mexico taxes are invalid
because the State's expenditures on reservation activity do not
equal the revenues collected. The Court of Appeals correctly noted
that the
Merrion footnote, 455 U.S. at
455 U. S. 159,
n. 26, "intimate[s] no opinion on the possibility of such a
challenge," but simply suggests that a state tax "might" be invalid
if greater than the State's "contact with the [on-reservation]
activity would justify." 106 N.M. at 520, 745 P.2d at 1173. Finding
no support for Cotton's position in
Merrion, the Court of
Appeals looked instead to our opinion in
Commonwealth Edison
Co. v. Montana, 453 U. S. 609
(1981), and concluded that a State's power to tax an activity
connected to interstate commerce is not limited to the value of the
services provided in support of that activity. 106 N.M. at 521, 745
P.2d at 1174. Agreeing with the trial court that the New Mexico
taxes were fairly related to the services provided to Cotton, the
Court of Appeals rejected Cotton's Commerce Clause challenge.
Ibid.
The Tribe, again participating as an
amicus curiae,
urged a different approach to the case. Unlike Cotton, the Tribe
argued that the state taxes could not withstand traditional
preemption analysis. The Tribe conceded that state laws, to the
extent they do not interfere with tribal self-government, may
control the conduct of non-Indians on the reservation. It
maintained, however, that the taxes at issue interfered with its
ability to raise taxes, and thus with its right to self-government.
The Court of Appeals rejected
Page 490 U. S. 173
this argument because the record contained no evidence of any
adverse impact on the Tribe and, indeed, indicated that the Tribe
could impose even higher taxes than it had without adverse effect.
[
Footnote 9]
The New Mexico Supreme Court granted, but then quashed, a writ
of certiorari. 106 N.M. 511, 745 P.2d 1159 (1987). We then noted
probable jurisdiction and invited the parties to brief and argue
the following additional question:
"Does the Commerce Clause require that an Indian Tribe be
treated as a State for purposes of determining whether a state tax
on nontribal activities conducted on an Indian Reservation must be
apportioned to account for taxes imposed on those same activities
by the Indian Tribe?"
485 U.S. 1005 (1988). We now affirm the judgment of the New
Mexico Court of Appeals.
II
This Court's approach to the question whether a State may tax
on-reservation oil production by non-Indian lessees has varied over
the course of the past century. At one time, such a tax was held
invalid unless expressly authorized by Congress; more recently,
such taxes have been upheld unless expressly or impliedly
prohibited by Congress. The changed approach to these taxes is one
aspect of the evolution of the doctrine of intergovernmental tax
immunity that we recently discussed in detail in
South Carolina
v. Baker, 485 U. S. 505
(1988).
During the first third of this century, this Court frequently
invalidated state taxes that arguably imposed an indirect
economic
Page 490 U. S. 174
burden on the Federal Government or its instrumentalities by
application of the "intergovernmental immunity" doctrine. That
doctrine
"was based on the rationale that any tax on income a party
received under a contract with the government was a tax on the
contract and thus a tax 'on' the government because it burdened the
government's power to enter into the contract."
Id. at
485 U. S. 518.
In a case decided in 1922, the Court applied the intergovernmental
immunity doctrine to invalidate a state tax on income derived by a
non-Indian lessee from the sale of his interest in oil produced on
Indian land.
See Gillespie v. Oklahoma, 257 U.
S. 501. Consistently with the view of intergovernmental
immunity that then prevailed, the Court stated that "a tax upon
such profits is a direct hamper upon the effort of the United
States to make the best terms that it can for its wards."
Id. at
257 U. S. 506
(citing
Weston v.
Charleston, 2 Pet. 449,
27 U. S. 468
(1829)). The same reasoning was used to invalidate a variety of
other state taxes imposed on non-Indian lessees at that time.
[
Footnote 10]
Shortly after reaching its zenith in the
Gillespie
decision, the doctrine of intergovernmental tax immunity started a
long path in decline, and has now been "thoroughly repudiated" by
modern case law.
South Carolina v. Baker, supra, at
485 U. S. 520.
In 1932, four Members of this Court argued that
Gillespie
was unsound and should be overruled.
See Burnet v. Coronado Oil
& Gas Co., 285 U. S. 393,
385 U. S. 401
(Stone, J., dissenting);
id. at
285 U. S. 405
(Brandeis, J., dissenting). Five years later, the Court took a
substantial step in that direction, rejecting the view that a
nondiscriminatory state tax on a
Page 490 U. S. 175
private party contracting with the Government is invalid because
the economic burden of the tax may fall on the Government.
See
James v. Dravo Contracting Co., 302 U.
S. 134 (1937).
"With the rationale for conferring a tax immunity on parties
dealing with another government rejected, the government contract
immunities recognized under prior doctrine were, one by one,
eliminated."
South Carolina v. Baker, supra, at
485 U. S. 522.
Specifically, in
Helvering v. Mountain Producers Corp.,
303 U. S. 376,
303 U. S.
386-387 (1938), the Court squarely overruled
Gillespie, supra. Thus, after
Mountain Producers
Corp., supra, was decided, oil and gas lessees operating on
Indian reservations were subject to nondiscriminatory state
taxation as long as Congress did not act affirmatively to preempt
the state taxes.
See ibid. See also Oklahoma Tax
Comm'n v. Texas Co., 336 U. S. 342
(1949).
In sum, it is well settled that, absent express congressional
authorization, a State cannot tax the United States directly.
See McCulloch v.
Maryland, 4 Wheat. 316 (1819). It is also clear
that the tax immunity of the United States is shared by the Indian
tribes for whose benefit the United States holds reservation lands
in trust.
See Montana v. Blackfeet Tribe of Indians,
471 U. S. 759,
471 U. S. 764
(1985). Under current doctrine, however, a State can impose a
nondiscriminatory tax on private parties with whom the United
States or an Indian tribe does business, even though the financial
burden of the tax may fall on the United States or tribe.
See
id. at
471 U. S. 765;
South Carolina v. Baker, supra, at
485 U. S. 523.
Although a lessee's oil production on Indian lands is therefore not
"automatically exempt from state taxation," Congress does, of
course, retain the power to grant such immunity.
Mescalero
Apache Tribe v. Jones, 411 U. S. 145,
411 U. S. 150
(1973). Whether such immunity shall be granted is thus a question
that "is essentially legislative in character."
Texas Co.,
supra, at
336 U. S.
365-366.
The question for us to decide is whether Congress has acted to
grant the Tribe such immunity, either expressly or
Page 490 U. S. 176
by plain implication. [
Footnote 11] In addition, we must consider Cotton's
argument that the "multiple burden" imposed by the state and tribal
taxes is unconstitutional.
III
Although determining whether federal legislation has preempted
state taxation of lessees of Indian land is primarily an exercise
in examining congressional intent, the history of tribal
sovereignty serves as a necessary "backdrop" to that process.
Cf. Rice v. Rehner, 463 U. S. 713,
463 U. S. 719
(1983) (quoting
McClanahan v. Arizona State Tax Comm'n,
411 U. S. 164,
411 U. S. 172
(1973)). As a result, questions of preemption in this area are not
resolved by reference to standards of preemption that have
developed in other areas of the law, and are not controlled by
"mechanical or absolute conceptions of state or tribal
sovereignty."
White Mountain Apache Tribe v. Bracker,
448 U. S. 136,
448 U. S. 145
(1980). Instead, we have applied a flexible preemption analysis
sensitive to the particular facts and legislation involved. Each
case "requires a particularized examination of the relevant state,
federal, and tribal interests."
Ramah Navajo School Bd., Inc.
v. Bureau of Revenue of New Mexico, 458 U.
S. 832,
458 U. S. 838
(1982). Moreover, in examining the preemptive force of the relevant
federal legislation, we are cognizant of both the broad policies
that underlie the legislation and the history of tribal
independence in the field at issue.
See ibid. It bears
emphasis that, although congressional silence no longer entails a
broad-based immunity from taxation for private parties doing
business with Indian tribes, federal preemption is not limited to
cases in which Congress has expressly -- as compared to
Page 490 U. S. 177
impliedly -- preempted the state activity. Finally we note that,
although state interests must be given weight and courts should be
careful not to make legislative decisions in the absence of
congressional action, ambiguities in federal law are, as a rule,
resolved in favor of tribal independence.
See ibid.
Against this background, Cotton argues that the New Mexico taxes
are preempted by the "federal laws and policies which protect
tribal self-government and strengthen impoverished reservation
economies." Brief for Appellants 16. Most significantly, Cotton
contends that the 1938 Act exhibits a strong federal interest in
guaranteeing Indian tribes the maximum return on their oil and gas
leases. Moreover, Cotton maintains that the Federal and Tribal
Governments, acting pursuant to the 1938 Act, its accompanying
regulations, and the Jicarilla Apache Tribal Code, exercise
comprehensive regulatory control over Cotton's on-reservation
activity. Cotton describes New Mexico's responsibilities, in
contrast, as "significantly limited." Brief for Appellants 21.
Thus, weighing the respective state, federal, and tribal interests,
Cotton concludes that the New Mexico taxes unduly interfere with
the federal interest in promoting tribal economic self-sufficiency,
and are not justified by an adequate state interest. We
disagree.
The 1938 Act neither expressly permits state taxation nor
expressly precludes it, but rather simply provides that
"unallotted lands within any Indian reservation or lands owned
by any tribe . . . may, with the approval of the Secretary of the
Interior, be leased for mining purposes, by authority of the tribal
council . . . for terms not to exceed ten years and as long
thereafter as minerals are produced in paying quantities."
25 U.S.C. § 396a. The Senate and House Reports that accompanied
the Act, moreover -- even when considered in their broadest
possible terms -- shed little light on congressional intent
concerning state taxation of oil and gas produced on leased lands.
See S.Rep. No. 985, 75th Cong., 1st Sess. (1937); H.R.Rep.
No. 1872, 75th Cong.,
Page 490 U. S. 178
3d Sess. (1938). Both Reports reflect that the proposed
legislation was suggested by the Secretary and considered by the
appropriate committees, which recommended that it pass without
amendment. Beyond this procedural summary, the Reports simply rely
on the Secretary's letter of transmittal to describe the purpose of
the Act. That letter provides that the legislation was intended, in
light of the disarray of federal law in the area, "to obtain
uniformity so far as practicable of the law relating to the leasing
of tribal lands for mining purposes," and, in particular, was
designed to "bring all mineral leasing matters in harmony with the
Indian Reorganization Act."
Id. at 1, 3; S.Rep. No. 985,
supra, at 2, 3. In addition, the letter contains the
following passage:
"It is not believed that the present law is adequate to give the
Indians
the greatest return from their property. As
stated, present law provides for locating and taking mineral leases
in the same manner as mining locations are made on the public lands
of the United States; but there are disadvantages in following this
procedure on Indian lands that are not present in applying for a
claim on the public domain. For instance, on the public domain, the
discoverer of a mineral deposit gets extralateral rights, and can
follow the ore beyond the side lines indefinitely, while on the
Indian lands, under the act of June 30, 1919, he is limited to the
confines of the survey markers not to exceed 600 feet by 1,500 feet
in any one claim. The draft of the bill herewith would permit the
obtaining of sufficient acreage to remove the necessity for
extralateral rights with all of its attending controversies."
Id. at 2; H.R.Rep. No. 1872,
supra, at 2
(emphasis added).
Relying on the first sentence in this paragraph, Cotton argues
that the 1938 Act embodies a broad congressional policy of
maximizing revenues for Indian tribes. Cotton finds support for
this proposition in
Montana v. Blackfeet Tribe,
471 U. S. 759
(1985). That case raised the question
Page 490 U. S. 179
whether the 1938 Act authorizes state taxation of a tribe's
royalty interests under oil and gas leases issued to nonmembers.
Applying the settled rule that a tribe may only be directly taxed
by a State if "Congress has made its intention to [lift the tribe's
exemption] unmistakably clear,"
id. at 765, we concluded
that "the State may not tax Indian royalty income from leases
issued pursuant to the 1938 Act,"
id. at 768. In a
footnote, we added the observation that direct state taxation of
Indian revenues would frustrate the 1938 Act's purpose of
"ensur[ing] that Indians receive
the greatest return from their
property,' [S.Rep. No. 985, supra, at] 2; H.R.Rep. No.
1872, supra, at 2." Id. at 767, n. 5.
To the extent Cotton seeks to give the Secretary's reference to
"the greatest return from their property" talismanic effect,
arguing that these words demonstrate that Congress intended to
guarantee Indian tribes the maximum profit available without regard
to competing state interests, it overstates its case. There is
nothing remarkable in the proposition that, in authorizing mineral
leases, Congress sought to provide Indian tribes with a profitable
source of revenue. It is, however, quite remarkable, indeed
unfathomable in our view, to suggest that Congress intended to
remove all state imposed obstacles to profitability by attaching to
the Senate and House Reports a letter from the Secretary that
happened to include the phrase "the greatest return from their
property." Read in the broadest terms possible, the relevant
paragraph suggests that Congress sought to remove "disadvantages in
[leasing mineral rights] on Indian lands that are not present in
applying for a claim on the public domain." S.Rep. No. 985,
supra, at 2; H.R.Rep. No. 1872,
supra, at 2. By
1938, however, it was established that oil and gas lessees of
public lands were subject to state taxation.
See Mid-Northern
Oil. Co. v. Walker, 268 U. S. 45
(1925). It is thus apparent that Congress was not concerned with
state taxation, but with matters such as the unavailability of
extralateral mineral rights on Indian land. Nor do we
Page 490 U. S. 180
read the
Blackfeet footnote, 471 U.S. at
471 U. S. 767,
n. 5, to give the Secretary's words greater effect. We think it
clear that the footnote simply stands for the proposition that the
Act's purpose of creating a source of revenue for Indian tribes
provides evidence that Congress did not intend to authorize direct
state taxation of Indian royalties.
We thus agree that a purpose of the 1938 Act is to provide
Indian tribes with badly needed revenue, but find no evidence for
the further supposition that Congress intended to remove all
barriers to profit maximization. The Secretary's letter of
transmittal, even when read permissively for broad policy goals and
even when read to resolve ambiguities in favor of tribal
independence, supports no more.
Our review of the legislation that preceded the 1938 Act
provides no additional support for Cotton's expansive view of the
Act's purpose. This history is relevant in that it supplies both
the legislative background against which Congress enacted the 1938
Act and the relevant "backdrop" of tribal independence. Congress
first authorized mineral leasing on Indian lands in 1891.
See Act of Feb. 28, 1891, § 3, 26 Stat. 795, 25 U.S.C. §
397 (1891 Act). That legislation, which empowered tribes to enter
into grazing and mining leases, only applied to lands "occupied by
Indians who have bought and paid for the same," and was thus
interpreted to be inapplicable to Executive Order reservations.
See British-American Oil Producing Co. v. Board of Equalization
of Montana, 299 U. S. 159,
299 U. S.
161-162,
299 U. S. 164
(1936). Mineral leasing on reservations created by Executive Order
-- like the Jicarilla Apache Reservation -- was not authorized
until almost four decades later. After years of debate concerning
whether Indians had any right to share in royalties derived from
oil and gas leases in Executive Order reservations, [
Footnote 12]
Page 490 U. S. 181
Congress finally enacted legislation in 1927 that authorized
such leases.
See Indian Oil Act of 1927, 44 Stat. (part 2)
1347, 25 U.S.C. § 398a (1927 Act).
While both the 1891 and 1927 Acts were in effect,
Gillespie was the prevailing law and, under its expansive
view of intergovernmental tax immunity, States were powerless to
impose severance taxes on oil produced on Indian reservations
unless Congress expressly waived that immunity. Just two years
after
Gillespie was decided, Congress took such express
action and authorized state taxation of oil and gas production in
treaty reservations.
See Indian Oil Leasing Act of 1924,
43 Stat. 244 (1924 Act),
current version at 25 U.S.C. §
398.
See also British-American Oil Producing Co. v. Board of
Equalization, supra (applying 1924 Act to uphold state tax
imposed on the production of oil and gas in
Page 490 U. S. 182
the Blackfeet Indian Reservation). More significantly for
purposes of this case, when Congress first authorized oil and gas
leasing on Executive Order reservations in the 1927 Act, it
expressly waived immunity from state taxation of oil and gas
lessees operating in those reservations.
See 44 Stat.
(part 2) 1347, 25 U.S.C. § 398c. Thus, at least as to Executive
Order reservations, state taxation of nonmember oil and gas lessees
was the norm from the very start. There is, accordingly, simply no
history of tribal independence from state taxation of these lessees
to form a "backdrop" against which the 1938 Act must be read.
We are also unconvinced that the contrast between the 1927 Act's
express waiver of immunity and the 1938 Act's silence on the
subject suggests that Congress intended to repeal the waiver in the
1938 Act, and thus to diametrically change course by implicitly
barring state taxation. The general repealer clause contained in
the 1938 Act provides that "[a]ll Act[s] or parts of Acts
inconsistent herewith are hereby repealed." 52 Stat. 348. Although
one might infer from this clause that all preceding, nonconflicting
legislation in the area, like the 1927 Act's waiver provision, is
implicitly incorporated, we need not go so far to simply conclude
that the 1938 Act's omission demonstrates no congressional purpose
to close the door to state taxation. Moreover, the contrast between
the 1927 and 1938 Acts is easily explained by the contemporaneous
history of the doctrine of intergovernmental tax immunity. In 1927,
Gillespie prevailed, and States were only permitted to tax
lessees of Indian lands if Congress expressly so provided. By the
time the 1938 Act was enacted, however,
Gillespie had been
overruled and replaced by the modern rule permitting such taxes
absent congressional disapproval. [
Footnote 13] Thus, Congress' approaches to both the
Page 490 U. S. 183
1927 and 1938 Acts were fully consistent with an intent to
permit state taxation of nonmember lessees. [
Footnote 14]
Cotton nonetheless maintains that our decisions in
White
Mountain Apache Tribe v. Bracker, 448 U.
S. 136 (1980), and
Ramah Navajo School Bd Inc. v.
Bureau of Revenue of
Page 490 U. S. 184
New Mexico, 458 U. S. 832
(1982), compel the conclusion that the New Mexico taxes are
preempted by federal law. In pressing this argument, Cotton ignores
the admonition included in both of those decisions that the
relevant preemption test is a flexible one sensitive to the
particular state, federal, and tribal interests involved.
See
id. at
458 U. S. 838;
Bracker, supra, at
448 U. S.
145.
In
Bracker, we addressed the question whether Arizona
could impose its motor carrier license and use fuel taxes on a
nonmember logging company's use of roads located solely within an
Indian reservation. Significantly, the roads at issue were "built,
maintained, and policed exclusively by the Federal Government, the
Tribe, and its contractors," 448 U.S. at
448 U. S. 150,
and the State was
"unable to identify any regulatory function or service [it]
performed . . . that would justify the assessment of taxes for
activities on Bureau and tribal roads within the reservation,"
id. at
448 U. S.
148-149.
See also id. at
448 U. S. 174
(Powell, J., concurring) ("The State has no interest in raising
revenues from the use of Indian roads that cost it nothing and over
which it exercises no control"). Moreover, it was undisputed in
Bracker that the economic burden of the taxes ultimately
fell on the Tribe.
Id. at
448 U. S. 151.
Based on these facts and on our conclusion that collection of the
taxes would undermine federal policy "in a context in which the
Federal Government has undertaken to regulate the most minute
details" of the Tribe's timber operations, we held that the taxes
were preempted.
Id. at
448 U. S.
149.
Ramah Navajo School Bd. involved a similar factual
scenario. In the late 1960's, New Mexico closed the only public
high school that served the Ramah Navajo children. The State then
sought to tax two nonmember construction firms hired by the Tribe
to build a school in the reservation. As in
Bracker, the
State asserted no legitimate regulatory interest that might justify
the tax.
Ramah Navajo School Bd., supra, at 843-846. Also
as in
Bracker, the economic burden of the tax ultimately
fell on the Tribe. And finally, again
Page 490 U. S. 185
as in
Bracker, we noted that federal law imposed a
comprehensive regulatory scheme.
Ramah Navajo School Bd.,
458 U.S. at
458 U. S.
839-842. We concluded:
"Having declined to take any responsibility for the education of
these Indian children, the State is precluded from imposing an
additional burden on the comprehensive federal scheme intended to
provide this education -- a scheme which has 'left the State with
no duties or responsibilities.'"
Id. at
458 U. S. 843
(quoting
Warren Trading Post Co. v. Arizona Tax Comm'n,
380 U. S. 685,
380 U. S. 691
(1965)).
The factual findings of the New Mexico District Court clearly
distinguish this case from both
Bracker, supra, and
Ramah Navajo School Bd., supra. After conducting a trial,
that court found that "New Mexico provides substantial services to
both the Jicarilla Tribe and Cotton," costing the State
approximately $3 million per year. App. to Juris. Statement 16.
Indeed, Cotton concedes that, from 1981 through 1985, New Mexico
provided its operations with services costing $89,384, but argues
that the cost of these services is disproportionate to the
$2,293,953 in taxes the State collected from Cotton. Brief for
Appellants 13-14. Neither
Bracker, nor
Ramah Navajo
School Bd., however, imposes such a proportionality
requirement on the States. [
Footnote 15] Rather, both cases involved complete
abdication or noninvolvement of the State in the on-reservation
activity. The present case is also unlike
Bracker and
Ramah Navajo School Bd. in that the District Court found
that "[n]o economic burden falls on the tribe by virtue of the
state taxes," App. to Juris. Statement 15, and that the Tribe
could, in fact, increase its taxes without adversely affecting
on-reservation oil and gas development,
id. at 17.
Finally, the District Court found that the
Page 490 U. S. 186
State regulates the spacing and mechanical integrity of wells
located on the reservation.
Id. at 16. Thus, although the
federal and tribal regulations in this case are extensive,
[
Footnote 16] they are not
exclusive, as were the regulations in
Bracker and
Ramah Navajo School Bd.
We thus conclude that federal law, even when given the most
generous construction, does not preempt New Mexico's oil and gas
severance taxes. This is not a case in which the State has had
nothing to do with the on-reservation activity save tax it. Nor is
this a case in which an unusually large state tax has imposed a
substantial burden on the Tribe. [
Footnote 17] It is, of course, reasonable to infer that
the New
Page 490 U. S. 187
Mexico taxes have at least a marginal effect on the demand for
on-reservation leases, the value to the Tribe of those leases, and
the ability of the Tribe to increase its tax rate. Any impairment
to the federal policy favoring the exploitation of on-reservation
oil and gas resources by Indian tribes that might be caused by
these effects, however, is simply too indirect and too
insubstantial to support Cotton's claim of preemption. To find
preemption of state taxation in such indirect burdens on this broad
congressional purpose, absent some special factor such as those
present in
Bracker and
Ramah Navajo School Bd.,
would be to return to the pre-1937 doctrine of intergovernmental
tax immunity. [
Footnote 18]
Any adverse effect on the Tribe's finances caused by the taxation
of a private party contracting with the Tribe would be ground to
strike the state tax. Absent more explicit guidance from Congress,
we decline to return to this long-discarded and thoroughly
repudiated doctrine.
IV
Cotton also argues that New Mexico's severance taxes -- "insofar
as they are imposed without allocation or apportionment on top of
Jicarilla Apache tribal taxes" -- impose "an unlawful
Page 490 U. S. 188
multiple tax burden on interstate commerce." Brief for
Appellants 33. In support of this argument, Cotton relies on three
facts: (1) that the State and the Tribe tax the same activity; (2)
that the total tax burden on Cotton is higher than the burden on
its off-reservation competitors who pay no tribal tax; and (3) that
the state taxes generate revenues that far exceed the value of the
services it provides on the reservation.
As we pointed out in the
Merrion footnote,
see
n. 5,
supra, a multiple taxation issue may arise when more
than one State attempts to tax the same activity. If a unitary
business derives income from several States, each State may only
tax the portion of that income that is attributable to activity
within its borders. [
Footnote
19]
See, e.g., Exxon Corp. v. Wisconsin Department of
Revenue, 447 U. S. 207
(1980). Thus, in such a case, an apportionment formula is necessary
in order to identify the scope of the taxpayer's business that is
within the taxing jurisdiction of each State. In this case,
however, all of Cotton's leases are located entirely within the
borders of the State of New Mexico and also within the borders of
the Jicarilla Apache Reservation. Indeed, they are also within the
borders of the United States. There are, therefore, three different
governmental entities, each of which has taxing jurisdiction over
all of the non-Indian wells.
Cf. Washington v. Confederated
Tribes of Colville Indian Reservation, 447 U.
S. 134 (1980) (Indian Tribe did not oust State of power
to impose cigarette tax on on-reservation sales to non-Indian
customers by imposing its own tax on transaction).
Page 490 U. S. 189
The federal sovereign has the undoubted power to prohibit
taxation of the Tribe's lessees by the Tribe, by the State, or by
both, but, since it has not exercised that power, concurrent taxing
jurisdiction over all of Cotton's on-reservation leases exists.
Cf. Commonwealth Edison Co. v. Montana, 453 U.S. at
453 U. S. 617
(noting that, because the taxed activity took place exclusively
within Montana -- although much of it on federal lands within the
State -- no nexus or apportionment problem existed). Unless and
until Congress provides otherwise, each of the other two sovereigns
has taxing jurisdiction over all of Cotton's leases.
It is, of course, true that the total taxes paid by Cotton are
higher than those paid by off-reservation producers. But neither
the State nor the Tribe imposes a discriminatory tax. The
burdensome consequence is entirely attributable to the fact that
the leases are located in an area where two governmental entities
share jurisdiction. As we noted in
Merrion, the tribal tax
does "not treat minerals transported away from the reservation
differently than it treats minerals that might be sold on the
reservation." 455 U.S. at
455 U. S.
157-158. Similarly, the New Mexico taxes are
administered in an evenhanded manner, and are imposed at a uniform
rate throughout the State -- both on and off the reservation.
See 106 N.M. at 521, 745 P.2d at 1174.
Cotton's most persuasive argument is based on the evidence that
tax payments by reservation lessees far exceed the value of
services provided by the State to the lessees, or, more generally,
to the reservation as a whole.
See n 6,
supra. There are, however, two sufficient
reasons for rejecting this argument. First, the relevant services
provided by the State include those that are available to the
lessees and the members of the Tribe, off the reservation as well
as on it. The intangible value of citizenship in an organized
society is not easily measured in dollars and cents; moreover, the
District Court found that the actual per capita state expenditures
for Jicarilla members are equal to or greater than
Page 490 U. S. 190
the per capita expenditures for non-Indian citizens.
See App. to Juris. Statement 16. Second, there is no
constitutional requirement that the benefits received from a taxing
authority by an ordinary commercial taxpayer -- or by those living
in the community where the taxpayer is located -- must equal the
amount of its tax obligations.
See Keystone Bituminous Coal
Assn. v. DeBenedictis, 480 U. S. 470,
480 U. S. 491,
n. 21 (1987). As we recently explained:
"[T]here is no requirement under the Due Process Clause that the
amount of general revenue taxes collected from a particular
activity must be reasonably related to the value of the services
provided to the activity. Instead, our consistent rule has
been:"
"Nothing is more familiar in taxation than the imposition of a
tax upon a class or upon individuals who enjoy no direct benefit
from its expenditure and who are not responsible for the condition
to be remedied."
" A tax is not an assessment of benefits. It is, as we have
said, a means of distributing the burden of the cost of government.
The only benefit to which the taxpayer is constitutionally entitled
is that derived from his enjoyment of the privileges of living in
an organized society, established and safeguarded by the devotion
of taxes to public purposes. Any other view would preclude the
levying of taxes except as they are used to compensate for the
burden on those who pay them, and would involve abandonment of the
most fundamental principle of government -- that it exists
primarily to provide for the common good."
"
Carmichael v. Southern Coal & Coke Co.,
301 U. S.
495,
301 U. S. 521-523 (1937)
(citations and footnote omitted)."
"
* * * *"
"There is no reason to suppose that this latitude afforded the
States under the Due Process Clause is somehow divested by the
Commerce Clause merely because the taxed activity has some
connection to interstate commerce;
Page 490 U. S. 191
particularly when the tax is levied on an activity conducted
within the State."
Commonwealth Edison Co., supra, at
453 U.S. 622-623.
Cotton, in effect, asks us to divest New Mexico of its normal
latitude because its taxes have "some connection" to commerce with
the Tribe. The connection, however, is by no means close enough.
There is simply no evidence in the record that the tax has had an
adverse effect on the Tribe's ability to attract oil and gas
lessees. It is, of course, reasonable to infer that the existence
of the state tax imposes some limit on the profitability of Indian
oil and gas leases -- just as it no doubt imposes a limit on the
profitability of off-reservation leasing arrangements -- but that
is precisely the same indirect burden that we rejected as a basis
for granting non-Indian contractors an immunity from state taxation
in
Helvering v. Mountain Producers Corp., 303 U.
S. 376 (1938);
Oklahoma Tax Comm'n v. United
States, 319 U. S. 598
(1943);
Oklahoma Tax Comm'n v. Texas Co., 336 U.
S. 342 (1949);
Moe v. Confederated Salish and
Kootenai Tribes of Flathead Reservation, 425 U.
S. 463 (1976); and
Washington v. Confederated Tribes
of Colville Indian Reservation, 447 U.
S. 134 (1980).
V
In our order noting probable jurisdiction we invited the parties
to address the question whether the Tribe should be treated as a
State for the purpose of determining whether New Mexico's taxes
must be apportioned. All of the Indian tribes that have filed
amicus curiae briefs addressing this question -- including
the Jicarilla Apache Tribe -- have uniformly taken the position
that Indian tribes are not States within the meaning of the
Commerce Clause. This position is supported by the text of the
Clause itself. Article I, § 8, cl. 3, provides the "Congress shall
have Power . . . To regulate Commerce with foreign Nations, and
among the several States, and with the Indian Tribes." Thus, the
Commerce Clause draws a clear distinction between "States" and
"Indian
Page 490 U. S. 192
Tribes." As Chief Justice Marshall observed in
Cherokee
Nation v. Georgia, 5 Pet. 1,
30 U. S. 18
(1831):
"The objects to which the power of regulating commerce might be
directed are divided into three distinct classes -- foreign
nations, the several states, and Indian Tribes. When forming this
article, the convention considered them as entirely distinct."
In fact, the language of the Clause no more admits of treating
Indian tribes as States than of treating foreign nations as States.
See ibid.
It is also well established that the Interstate Commerce and
Indian Commerce Clauses have very different applications. In
particular, while the Interstate Commerce Clause is concerned with
maintaining free trade among the States even in the absence of
implementing federal legislation,
see McLeod v. J. E. Dilworth
Co., 322 U. S. 327,
322 U. S. 330
(1944);
Pike v. Bruce Church, Inc., 397 U.
S. 137 (1970), the central function of the Indian
Commerce Clause is to provide Congress with plenary power to
legislate in the field of Indian affairs,
see Morton v.
Mancari, 417 U. S. 535,
417 U. S.
551-552 (1974); F. Cohen, Handbook of Federal Indian Law
207-208, and nn. 2, 3 and 9-11 (1982). The extensive case law that
has developed under the Interstate Commerce Clause, moreover, is
premised on a structural understanding of the unique role of the
States in our constitutional system that is not readily imported to
cases involving the Indian Commerce Clause. Most notably, as our
discussion of Cotton's "multiple taxation" argument demonstrates,
the fact that States and tribes have concurrent jurisdiction over
the same territory makes it inappropriate to apply Commerce Clause
doctrine developed in the context of commerce "among" States with
mutually exclusive territorial jurisdiction to trade "with" Indian
tribes.
Accordingly, we have no occasion to modify our comment on this
question in the
Bracker case:
"Tribal reservations are not States, and the differences in the
form and nature of their sovereignty make it
Page 490 U. S. 193
treacherous to import to one notions of preemption that are
properly applied to the other."
448 U.S. at
448 U. S.
143.
The judgment of the New Mexico Court of Appeals is
Affirmed.
[
Footnote 1]
The full text of the Executive Order reads as follows:
"
EXECUTIVE MANSION, February 11, 1887"
"It is hereby ordered that all that portion of the public domain
in the Territory of New Mexico which, when surveyed, will be
embraced in the following townships, viz:"
"27, 28, 29, and 30 north, ranges 1 east, and 1, 2, 3 west; 31
and 32 north, ranges 2 west and 3 west, and the south half of the
township 31 north, range 1 west, be, and the same is hereby, set
apart as a reservation for the use and occupation of the Jicarilla
Apache Indians:
Provided, That this order shall not be so
construed as to deprive any bona fide settler of any valid rights
he may have acquired under the law of the United States providing
for the disposition of the public domain."
"GROVER CLEVELAND"
1 Kappler, at 875. The boundaries of the reservation were
further defined in subsequent Executive Orders.
See 3
id. at 681-682, 684-685 (Executive Orders of Presidents
Roosevelt and Taft);
see also Merrion v. Jicarilla Apache
Tribe, 455 U. S. 130,
455 U. S.
133-134, n. 1 (1982).
[
Footnote 2]
Effective January 1, 1988, the Tribe added a third tax, which is
based on the value of possessory interests -- including leasehold
interests -- held by taxpayers on the reservation.
See
Possessory Interest Tax, Ordinance No. 88-R-152, reprinted in App.
to Reply Brief for Appellants 4-19 (filed Mar. 16, 1988). Because
Cotton does not seek refund of state taxes paid after the
possessory interest tax took effect, and because this tax was not
enacted until after the New Mexico Court of Appeals issued its
decision, we leave it to the side for purposes of our decision.
[
Footnote 3]
Cotton also pays an overriding royalty of 12 1/2 percent of the
value of production to the assignors of the five leases.
See 106 N.M. 517, 518,
745 P.2d
1170, 1171 (1987).
[
Footnote 4]
The five taxes are the Oil and Gas Severance Tax, N.M.Stat.Ann.
§ 7-29-1 (1986); the Oil and Gas Conservation Tax, § 7-30-1; the
Oil and Gas Emergency School Tax, § 7-31-1; the Oil and Gas Ad
Valorem Production Tax, § 7-32-1; and the Production Equipment Ad
Valorem Tax, § 734-1.
[
Footnote 5]
The entire footnote reads as follows:
"26. Petitioners contend that, because New Mexico may tax the
same mining activity at full value, the Indian tax imposes a
multiple tax burden on interstate commerce in violation of the
Commerce Clause. The multiple taxation issue arises where two or
more taxing jurisdictions point to some contact with an enterprise
to support a tax on the entire value of its multistate activities,
which is more than the contact would justify.
E.g., Standard
Oil Co. v. Peck, 342 U. S. 382,
342 U. S.
384-385 (1952). This Court has required an apportionment
of the tax based on the portion of the activity properly viewed as
occurring within each relevant State.
See, e.g., Exxon Corp. v.
Wisconsin Dept. of Revenue, 447 U. S. 207,
447 U. S.
219 (1980);
Washington Revenue Dept. v. Association
of Washington Stevedoring Cos., 435 U. S.
734,
435 U. S. 746, and n. 16
(1978)."
"This rule has no bearing here, however, for there can be no
claim that the Tribe seeks to tax any more of petitioners' mining
activity than the portion occurring within tribal jurisdiction.
Indeed, petitioners do not even argue that the Tribe is seeking to
seize more tax revenues than would be fairly related to the
services provided by the Tribe. . . . In the absence of such an
assertion, and when the activity taxed by the Tribe occurs entirely
on tribal lands, the multiple taxation issue would arise only if a
State attempted to levy a tax on the same activity which
is more than the
State's contact with the activity would
justify. In such a circumstance, any challenge asserting that
tribal and state taxes create a multiple burden on interstate
commerce should be directed at the state tax, which, in the absence
of congressional ratification, might be invalidated under the
Commerce Clause. These cases, of course, do not involve a challenge
to state taxation, and we intimate no opinion on the possibility of
such a challenge."
455 U.S. at
455 U. S.
158-159 (emphasis in original).
[
Footnote 6]
Cotton's evidence tended to prove that, for the tax years
1981-1985, it paid New Mexico $2,293,953, while only receiving the
equivalent of $89,384 in services to its operations in return.
See 106 N.M., at 520, 745 P.2d at 1173. Cotton's evidence
further suggested that, over the same period, the State received
total tax revenues of $47,483,306 from the on-reservation,
nonmember oil and gas producers, while only providing $10,704,748
in services to the reservation as a whole.
See ibid.
[
Footnote 7]
The District Court found that New Mexico spends approximately $3
million per year in providing on-reservation services to Cotton and
the Tribe. App. to Juris. Statement 16. In addition, the court
found that New Mexico does not discriminate against the Tribe or
its members in providing state services; indeed, the State spends
as much or more per capita on members of the Tribe than on
nonmembers.
Ibid. The court further found that New Mexico
provides services on the reservation not provided by either the
tribal or Federal Governments, and provides additional services off
the reservation that benefit the reservation and members of the
Tribe.
Ibid. Finally, the court found that the State
regulates the spacing and mechanical integrity of wells located
both on and off the reservation.
Ibid.
[
Footnote 8]
The District Court wrote:
"The state's nondiscriminatory and substantial expenditures made
on the Jicarilla Apache Reservation give the state a valid interest
in imposing its taxes on non-Indian commercial activity on the
reservation. The state need not show that every dollar of state
taxes collected from the Jicarilla Reservation was spent on the
reservation. The state provides the benefits of an organized and
civilized society to all of its citizens, Jicarilla and non-Indian
alike, and to businesses, including Cotton, extracting oil and gas
in the state."
Id. at 19.
[
Footnote 9]
The Court of Appeals noted that Cotton, and not the Tribe, paid
the taxes at issue; that "[t]he record contains no evidence of an
impact [on] tribal sovereignty"; that Cotton drilled 12 new wells
while subject to both the state and tribal taxes and "shows no
signs of disrupting production because of the tax burden"; and
that, at trial, "[t]he Tribe's own consultant indicated that the
Tribe could charge an even higher tax despite the state taxes
imposed on Cotton." 106 N.M. at 522, 745 P.2d at 1175.
[
Footnote 10]
The Court held that non-Indian mineral lessees were exempt from
state occupation and privilege taxes,
see Choctaw, O. & G.
R. Co. v. Harrison, 235 U. S. 292
(1914), exempt from state taxes on the value of their leasehold,
see Indian Territory Illuminating Oil Co. v. Oklahoma,
240 U. S. 522
(1916), exempt from state gross production.taxes,
see Howard v.
Gipsy Oil Co., 247 U.S. 503 (1918) (per curiam);
Large Oil
Co. v. Howard, 248 U.S. 549 (1919) (per curiam), and exempt
from State
ad valorem taxes in some circumstances,
see
Jaybird Mining Co. v. Weir, 271 U. S. 609
(1926).
[
Footnote 11]
Although Cotton did not press the preemption argument as an
independent claim before the New Mexico Court of Appeals, we
conclude that the issue is properly before us. Cotton did rely on
our preemption cases at least as a "backdrop" for its multiple
taxation claim. In addition, the preemption claim was fully briefed
before the Court of Appeals by the Tribe in its status as an
amicus curiae. And finally, the preemption claim was
carefully considered and passed upon by the Court of Appeals.
[
Footnote 12]
This history is recounted in L. Kelly, The Navajo Indians and
Federal Indian Policy 48-103 (1968) (hereinafter Kelly).
Of particular significance, in 1922, the Secretary took the
position that Executive Order reservations "are without question
lands
owned by the United States,'" and thus subject to leasing
under the Mineral Lands Leasing Act of 1920, 41 Stat. 450, 30
U.S.C. § 189. Harrison, 49 L.D. 139, 144. As such, the
Executive Order tribes had no right to share in royalties derived
from oil and gas leases. Two years later, then-Attorney General
Stone rendered an opinion concluding that the Mineral Lands Leasing
Act did not apply to Executive Order reservations. 34 Op.Atty.Gen.
171, 181. This decision made clear that new federal legislation
would be required to open Executive Order reservations to oil and
gas leasing. For the next few years, a number of legislative
solutions were proposed and considered. For example, in 1926,
Representative Carl Hayden introduced legislation that would have
provided for Executive Order reservation leasing in accordance with
the Indian Oil Leasing Act of 1924, 43 Stat. 244, but which, in
lieu of permitting a state production tax, would have given to the
relevant State 37 1/2 percent of the royalties, rent, and bonuses
received by the tribe. See Kelly 78. This payment was to
be used for building and maintaining roads on the reservation or to
support public schools attended by Indian children. See
id. at 79. A bill introduced in the Senate would have attached
no qualification to how the State might spend its 37 1/2 percent
share. See id. at 88-89. Finally, Congress settled on the
terms of the Indian Oil Act of 1927, which authorized oil and gas
leasing in Executive Order reservations and allowed States to tax
"any lessee upon lands within Executive order Indian reservations
in the same manner as such taxes are otherwise levied and
collected." 44 Stat. (part 2) 1347, 25 U.S.C. § 398c.
[
Footnote 13]
Although
Gillespie was not explicitly overruled until
1938 in
Helvering v. Mountain Producers Corp.,
303 U. S. 376, the
holding in that case was plainly foreshadowed by the development of
the law in this area during the preceding decade.
See
supra at
490 U. S.
174-175. The fact that the text of the 1938 Act had been
drafted before our decision in
Mountain Producers was
actually handed down does not, therefore, have the significance
that the dissent ascribes to it.
See post at 197-198.
[
Footnote 14]
Our decision in
Montana v. Blackfeet Tribe,
471 U. S. 759
(1985), is not to the contrary. In that case, we considered the
distinct question whether the 1938 Act, through incorporation of
the 1927 Act, expressly authorized direct taxation of Indian
royalties. In concluding that it did not, we made clear that our
holding turned on the rule that Indian tribes, like the Federal
Government itself, are exempt from direct state taxation, and that
this exemption is "lifted only when Congress has made its intention
to do so unmistakably clear."
Id. at
471 U. S. 765.
We stressed that the 1938 Act "contains no explicit consent to
state taxation," and that the reverse implication of the general
repealer clause that the 1927 waiver might be incorporated "does
not satisfy the requirement that Congress clearly consent to state
taxation."
Id. at
471 U. S. 766-767. Our conclusion that the 1938 Act does
not expressly authorize direct taxation of Indian tribes does not
entail the further step that the Act impliedly prohibits taxation
of nonmembers doing business on a reservation.
Nor can a congressional intent to preempt state taxation be
found in the Indian Reorganization Act, 48 Stat. 984, 25 U.S.C. 461
et seq., the Indian Financing Act of 1974, 88 Stat. 77, 25
U.S.C. § 1451
et seq., or the Indian Self-Determination
and Education Assistance Act of 1975, 88 Stat. 2203, 25 U.S.C. §
450
et seq. Although these statutes "evidence to varying
degrees a congressional concern with fostering tribal
self-government and economic development,"
Washington v.
Confederated Tribes of Colville Indian Reservation,
447 U. S. 134,
447 U. S. 155
(1980), they no more express a congressional intent to preempt
state taxation of oil and gas lessees than does the 1938 Act. More
instructive is the Crude Oil Windfall Profit Tax Act of 1980, 94
Stat. 229, 26 U.S.C. § 4986
et seq. In imposing the
windfall profits tax, Congress expressly exempted certain Indian
producers,
see 26 U.S.C. § 4994(d), but decided not to
exempt "oil received by non-Indian lessees of tribal interests."
See S.Rep. No. 96-394, p. 61 (1979).
See also
H.R.Conf.Rep. No. 96-817, p. 108 (1980). If Congress was of the
view that taxing non-Indian lessees would interfere with the goal
of promoting tribal economic self-sufficiency, it seems unlikely
that it would have imposed this additional tax on those
lessees.
[
Footnote 15]
Nor are we inclined to do so today. Not only would such a
proportionality requirement create nightmarish administrative
burdens, but it would also be antithetical to the traditional
notion that taxation is not premised on a strict
quid pro
quo relationship between the taxpayer and the tax collector.
See Carmichael v. Southern Coal & Coke Co.,
301 U. S. 495,
301 U. S.
521-523 (1937).
[
Footnote 16]
The federal regulations provide,
inter alia, that
tribal leases may only be offered for sale pursuant to specified
standards governing notice and bidding, 25 CFR § 211.3(a) (1988),
that the Secretary reserves "the right to reject all bids when in
his judgment the interests of the Indians will be best served by so
doing," § 211.3(b), that corporate bidders must submit detailed
information concerning their officers, directors, shareholders, and
finances, § 211.5, that no single lease for oil and gas may exceed
2,560 acres, § 211.9, and that a primary lease may not exceed 10
years, § 211.10. The regulations also address the manner of payment
and amount of rents and royalties, §§ 211.12, 211.13(a), and
provide for Interior Department inspection of lessees' premises and
records, § 211.18. Other federal regulations address the spacing,
drilling, and plugging of wells and impose reporting requirements
concerning production and environmental protection.
See 43
CFR §§ 3160.0-1 - 3186.4 (1987).
The Tribe imposes further regulations, including a requirement
that anyone seeking to conduct oil and gas operations in the
reservation must obtain a permit from the Tribal Oil and Gas
Administration, J.A.T.C., Tit. 18, ch. 1, § 3, must post a bond, §
4(B), must open covered premises for inspection, § 5(C)(2), and
must comply with the Tribe's environmental protection ordinance, §
6(A)(3).
[
Footnote 17]
We therefore have no occasion to reexamine our summary
affirmance of the Court of Appeals for the Ninth Circuit's
conclusion that Montana's unique severance and gross proceeds taxes
may not be imposed on coal mined on Crow tribal property.
See
Montana v. Crow Tribe, 484 U.S. 997 (1988),
summarily
aff'g 819 F.2d 895 (1987). In that case, as the Ninth Circuit
noted, the state taxes had a negative effect on the marketability
of coal produced in Montana.
See id. at 900. Moreover, as
the Solicitor General stated in urging that we affirm the judgment
of the Court of Appeals, the Montana taxes at issue were
"extraordinarily high." Motion to Affirm for United States, O.T.
1987, No. 87-343, p. 12. According to the Crow Tribe's expert, the
combined effective rate of the Montana taxes was 32.9 percent,
"more than twice that of any other state's coal taxes." 819 F.2d at
899, n. 2.
See also JUSTICE BLACKMUN's discussion of the
"enormous revenues" generated by the Montana severance tax in
Commonwealth Edison Co. v. Montana, 453 U.
S. 609,
453 U. S.
641-642 (1981) (BLACKMUN, J., dissenting).
[
Footnote 18]
It is important to keep in mind that the primary burden of the
state taxation falls on the non-Indian taxpayers.
Amicus
curiae briefs supporting the position of Cotton Petroleum
Corp. in this case have been filed by New Mexico Oil & Gas
Association, Texaco. Inc., Chevron U.S.A. Inc., Union Oil Company
of California, Phillips Petroleum Company, Wilshire Oil Company of
Texas, Exxon Corporation, Mobil Exploration and Producing North
America Inc., Anadarko Petroleum Corporation, Southland Royalty
Company, and Marathon Oil Company.
[
Footnote 19]
In
Hans Rees' Sons, Inc. v. North Carolina ex rel.
Maxwell, 283 U. S. 123,
283 U. S. 134
(1931), we wrote:
"When . . . there are different taxing jurisdictions, each
competent to lay a tax with respect to what lies within, and is
done within, its own borders, and the question is necessarily one
of apportionment, evidence may always be received which tends to
show that a State has applied a method which, albeit fair on its
face, operates so as to reach profits which are in no just sense
attributable to transactions within its jurisdiction."
JUSTICE BLACKMUN, with whom JUSTICE BRENNAN and JUSTICE MARSHALL
join, dissenting.
Although the Jicarilla Apache Tribe is not a party to the
appeal, this case centrally concerns "the boundaries between state
regulatory authority and [the Tribe's] self-government."
White
Mountain Apache Tribe v. Bracker, 448 U.
S. 136,
448 U. S. 141
(1980). The basic principles that define those boundaries are well
established. The Court today, while faithfully reciting these
principles, is less faithful in their application.
Preemption is essentially a matter of congressional intent. In
this case, our goal should be to determine whether the State's
taxation of Cotton Petroleum's reservation oil production is
consistent with federal Indian policy as expressed in relevant
statutes and regulations. First and foremost, we must look to the
statutory scheme Congress has established to govern the activity
the State seeks to tax in order to see whether the statute itself
expresses Congress' views on the question of state taxation. As the
discussion in Part I below reveals, the statute most relevant to
this case makes clear that Congress intended to foreclose the kind
of tax New Mexico has imposed. Second, we must consider other
indications of whether federal policy permits the tax in question.
Part II below demonstrates that, under established principles,
state taxation is preempted by federal and tribal interests in this
case. Because the record is more than adequate to demonstrate the
preemptive force of federal and tribal interests, I dissent.
[
Footnote 2/1]
Page 490 U. S. 194
I
The most relevant statute is the Indian Mineral Leasing Act of
1938, 52 Stat. 347, 25 U.S.C. § 396a
et seq. (1938 Act),
pursuant to which the Jicarilla Apache entered into mineral leases
with appellant Cotton Petroleum. The 1938 Act is silent on the
question of state taxation. But, as interpreted by this Court in
Montana v. Blackfeet Tribe, 471 U.
S. 759 (1985), the silence of the 1938 Act is eloquent
and argues forcefully against the result reached by the
majority.
In
Montana, the State sought to tax the Blackfeet
Tribe's royalty interests under oil and gas leases held, pursuant
to the 1938 Act, by non-Indian lessees operating on the
reservation. The State sought to do so despite the fact that the
1938 Act contains no express authorization for any state tax on
such leases. The State based its claim of taxation authority on a
1924 statute enacted to permit oil and gas leasing on Indian
reservations created by treaty. [
Footnote 2/2] Act of May 29, 1924, ch. 210, 43 Stat.
244, 25 U.S.C. § 398 (1924 Act). The 1924 Act contained a proviso
that
"the production of oil and gas and other minerals on such lands
may be taxed by the State in which said lands are located in all
respects the same as production on unrestricted lands, and the
Secretary of the Interior is authorized and directed to cause to be
paid the tax so
Page 490 U. S. 195
assessed against the royalty interests on said lands."
The State took the position that the 1938 Congress could not be
presumed by mere silence to have abrogated the law permitting state
taxation. 471 U.S. at
471 U. S.
765-766.
In
Montana, we squarely rejected the State's argument.
After noting that the 1938 Act was "comprehensive legislation,"
id. at
471 U. S. 763,
containing a general repealer of all statutory provisions
"
inconsistent herewith,'" id. at 471 U. S. 764,
quoting § 7 of the 1938 Act, see note following 25 U.S.C.
§ 396a, we held that, under the canons of construction applicable
to laws governing Indians, the general repealer clause could not be
taken as implicitly incorporating consistent provisions of earlier
laws. Rather, in the Indian context, clear congressional consent to
state taxation was required and, on that point, we found no
"indication that Congress intended to incorporate implicitly in the
1938 Act the taxing authority of the 1924 Act." 471 U.S. at
471 U. S. 767.
Interpreting the 1938 Act as preserving the taxing authority of the
1924 Act, we held, would not "satisfy the rule requiring that
statutes be construed liberally in favor of the Indians."
Ibid. In addition, we observed that such an interpretation
would undermine the purposes of the 1938 Act as reflected in its
legislative history: to achieve uniformity in tribal leasing, to
harmonize tribal leasing with the goals of the Indian
Reorganization Act, Act of June 18, 1934, ch. 576, § 16, 48 Stat.
987, codified at 25 U.S.C. § 476 et seq. (IRA),
and "to ensure that Indians receive `the greatest return from their
property.'" 471 U.S. at 471 U. S. 767,
n. 5.
The majority appropriately acknowledges that Congress knew when
it enacted the 1938 Act that a statute governing tribal leases that
failed expressly to authorize state taxation of Indian royalty
interests would have the effect of leaving the States without the
power to tax those interests.
Ante at
490 U. S. 183,
n 14. Thus, the clear import
of our decision in
Montana is that Congress' silence in
1938 expressed an intent substantially to narrow state taxing
authority.
Page 490 U. S. 196
But the majority takes the position that the 1938 Act's silence
means something completely different when it comes to the kind of
taxation at issue here, and expends considerable energy attempting
to support that view. The majority argues that the same silence
that reflected an intent to prohibit state taxation of Indian
tribes' royalty interests was "fully consistent with an intent to
permit state taxation
of non-member lessees,"
ante at
490 U. S. 183
(emphasis added). The majority notes that, when the pre-1938
mineral-leasing statutes were enacted (including the Indian Oil Act
of 1927, 44 Stat. 1347, 25 U.S.C. § 398a
et seq., which is
of the greatest relevance here,
see n 2,
supra), express congressional
authorization was required not only for direct taxes on Indians (or
other "sovereigns"), but also for taxes on those who contracted
with Indians.
See, e.g., Gillespie v. Oklahoma,
257 U. S. 501
(1922) (applying intergovernmental immunity doctrine to a tax on
the net income of the non-Indian holder of a reservation mineral
lease). In contrast, "[b]y the time the 1938 Act was enacted, . . .
Gillespie had been overruled and replaced by the modern
rule permitting such taxes absent congressional disapproval."
Ante at
490 U. S. 182.
From this, the majority infers that, because Congress knew in 1938
that it could maintain the pre-1938
status quo regarding
lessee taxation simply by saying nothing, Congress' silence is
consistent with an intent to maintain that
status quo.
The argument that the 1938 congressional silence regarding
lessee taxation is consistent with an intent to permit such
taxation cannot, for two reasons, withstand close scrutiny. First,
even if the majority is correct in seeking the meaning of Congress'
silence in changes in this Court's intergovernmental tax immunity
jurisprudence, the facts defeat the majority's theory. Second, and
fundamentally, the majority's court-centered approach fails to give
due weight to a far more significant intervening event: the major
change in federal Indian policy embodied in the Indian
Reorganization Act of 1934.
Page 490 U. S. 197
The case which overruled Justice Holmes' opinion for the Court
in
Gillespie was
Helvering v. Mountain Producers
Corp., 303 U. S. 376
(1938).
Mountain Producers was decided on March 7, 1938.
The majority, indeed, is correct that the 1938 Act was enacted on
May 11, 1938, after that case was decided. But a review of the
history of the 1938 Act reveals that it had assumed final form well
before this Court's decision in
Mountain Producers. The
majority's chronology thus is somewhat misleading, at least if the
realities of the legislative process are to have any relevance to
the analysis of legislative intent.
The 1938 Act was drafted by the Department of the Interior and
was submitted to the respective Committees on Indian Affairs of the
House and Senate on June 17, 1937.
See S.Rep. No. 985,
75th Cong., 1st Sess., 1 (1937) (Senate Report); H.R.Rep. No. 1872,
75th Cong., 3d Sess., 1 (1938) (House Report). [
Footnote 2/3] The proposed bill was reported out of
the Senate Committee in July, 1937, with a recommendation that it
be passed without amendment. Senate Report at 1. The bill was
passed by the Senate without debate on August 6, 1937.
See
81 Cong.Rec. 8399. The bill was reported out of the House Committee
on Indian Affairs on March 3, 1938, again with a recommendation
that it pass without amendment. House Report at 1. All this took
place before the March 7, 1938, decision in
Mountain
Producers, during a period in which, the majority
acknowledges, the proposed statute's silence on the question of
taxation would have meant that the States had no power to tax
non-Indian lessees'
Page 490 U. S. 198
oil and gas production. The House passed the bill, also without
debate, on May 2, 1938.
See 83 Cong.Rec. 6057-6058.
Thus, although the majority is technically correct that the 1938
Act did not become law until after the announcement of this Court's
decision in
Mountain Producers, the legislation was
formulated, considered by the House and Senate committees, referred
out of the committees without amendment, and passed by the Senate,
all before
Mountain Producers on March 7, 1938, changed
the law of intergovernmental tax immunity. Up until that point, the
clear meaning of the statute, as our decision in
Montana
makes clear, is that the State lacked power to impose the tax at
issue in this case. There is no evidence that the change in the law
wrought by
Mountain Producers was brought to the attention
of the House. It defies historical sense to make
Mountain
Producers the centerpiece of the interpretation of a statute
which reached final form before
Mountain Producers was
decided. [
Footnote 2/4]
The Court in
Montana put forward a more sensible
explanation of the absence of state taxation authority in the 1938
Act. As the relevant House and Senate Reports explain, the 1938 Act
was crafted, proposed, and enacted in light of the recently enacted
IRA. The IRA worked a fundamental
Page 490 U. S. 199
change in federal Indian law marked by two principal goals:
"'to rehabilitate the Indian's economic life and to give him a
chance to develop the initiative destroyed by a century of
oppression and paternalism.'"
Mescalero Apache Tribe v. Jones, 411 U.
S. 145,
411 U. S. 152
(1973), quoting H.R.Rep. No. 1804, 73d Cong., 2d Sess., 6 (1934).
In reviewing pre-1934 Indian mineral leasing statutes, the Interior
Department found them wanting in both respects. The statutes not
only gave the Indians no "voice" in the granting of leases, but
also were not "adequate to give Indians the greatest return from
their property." House Report at 2; Senate Report at 2. The 1938
Act was proposed to "bring all mineral leasing matters in harmony
with the Indian Reorganization Act" in these respects. House Report
at 3; Senate Report at 3. The Court observed in
Montana
that "these purposes would be undermined" by treating the 1938 Act
as explicitly or implicitly leaving the taxation provisions of
prior statutes in force. 471 U.S. at
471 U. S. 767,
n. 5. [
Footnote 2/5]
The majority's observation,
ante at
490 U. S. 182,
that "[t]here is . . . no history of tribal independence from state
taxation of these lessees to form a
backdrop' against which the
1938 Act must be read" cannot be dispositive. The IRA, enacted only
a few years before the 1938 Act, is itself sufficient "backdrop" to
inform our interpretation, for the IRA marked the rejection of all
the assumptions upon which prior statutes providing for state
taxation of reservation mineral production had been based.
The expectation that animated Indian policy under the General
Allotment Act of 1887, ch. 119, 24 Stat. 388, was
Page 490 U. S. 200
that, at the expiration of a 25-year trust period, there would
be no difference between Indians and other citizens: tribal life
would come to an end, the Indians would be assimilated and fully
subject to state governmental authority, Indian lands would be
freely alienable to non-Indians and subject to state taxation, and
surplus lands would be opened to private development.
See
generally F. Cohen, Handbook of Federal Indian Law 131-132
(1982); Readjustment of Indian Affairs: Hearings on H.R. 7902
before the House Committee on Indian Affairs (History of the
Allotment Policy), 73d Cong., 2d Sess., pt. 9, pp. 428-489 (1934);
Blackfeet Tribe of Indians v. Montana, 729 F.2d 1192, 1195
(CA9 1984),
aff'd, 471 U. S. 759
(1985).
With the passage of time, eventual state control remained the
goal of the allotment policy, but delays in the full implementation
of that policy became a matter of concern to the States. This was
particularly evident in the area of mineral leasing. Such leasing
for periods of up to 10 years had been authorized by statute in
1891, Act of Feb. 28, 1891, ch. 383, § 3, 26 Stat. 795, but it
became increasingly clear that longer-term leases were an economic
necessity. A pattern soon developed: in return for Congress'
extending the period during which mineral rights would be reserved
to the Indian tribes, States were given the power to tax mineral
production.
See 3 Indians of the United States, Hearings
before a Subcommittee of the House Committee on Indian Affairs
191-192, 281, 444-445 (1920). The taxation proviso in the 1924 Act,
which was included at the insistence of members of the
Subcommittee, was true to that pattern.
See H.R. No. 386,
68th Cong., 1st Sess. (1924);
see generally Brief for
United States as
Amicus Curiae in
Montana v. Blackfeet
Tribe, O.T. 1983, No. 83-2161, pp. 16-26.
By 1927, when Congress addressed the problem of oil and gas
leasing on Executive Order reservations, the States were anxious to
open those lands for mineral development, and the debate in
Congress squarely addressed the conflicting interests
Page 490 U. S. 201
of States and Indian tribes. The Attorney General had issued a
controversial opinion that the Mineral Lands Leasing Act of 1920,
41 Stat. 437, did not apply to Executive Order reservations, 34
Op.Atty.Gen. 181 (1924) (opinion of then-Attorney General Harlan F.
Stone), and the matter was in litigation.
See Development
of Oil and Gas Mining Leases on Indian Reservations, Hearings on S.
1722 and S. 3159 before the Subcommittee of the Senate Committee on
Indian Affairs, 69th Cong., 1st Sess., 29-30 (1926). If the
Attorney General's position did not prevail in the courts, the
Indians would receive no income from mineral production on
Executive Order reservations, and any claim of Indian entitlement
to those reservations would be substantially undermined. In that
uncertain legal climate, the 1927 Act is best viewed as a
compromise: Indian interests acquiesced in the States' claim that
they had a right to increase their general revenues by sharing in
the profits of reservation mining activities; in return, the
Indians avoided legislation that would have obliterated any hope of
obtaining recognition of their legal entitlement to Executive Order
lands.
See id. at 9, 55, 61, 63, 98-99.
See also
Hearings on S. 3159 and S. 4152 before the Senate Committee on
Indian Affairs, 69th Cong., 1st Sess., 14, 24-25, 33-34 (1926).
[
Footnote 2/6]
The political climate changed dramatically with the passage in
1934 of the IRA, in which "
[t]he policy of allotment and sale
of surplus reservation land was repudiated'" as antithetical to
tribal interests. Moe v. Confederated Salish and Kootenai
Tribes of Flathead Reservation, 425 U.
S. 463, 425 U. S. 479
(1976), quoting Mattz v. Arnett, 412 U.
S. 481, 412 U. S. 496,
n. 18 (1973). It would be a mistake to impute the political
compromises of the allotment period into legislation enacted soon
after the passage
Page 490 U. S. 202
of the IRA, legislation expressly tailored to bring Indian
mineral policy into line with a radically altered set of
assumptions about the political and economic future of the
Indians.
Furthermore, the IRA embodied an approach to tribal independence
which would be undone by limiting Indian tribes to those powers
they had been permitted to exercise in the past. The Department of
the Interior, in interpreting the IRA at Congress' request,
realized that the assertions of Indian autonomy that the IRA sought
to foster would seem novel, and would likely come at the expense of
settled state expectations.
"It is a fact that State governments and administrative
officials have frequently trespassed upon the realm of tribal
autonomy, presuming to govern the Indian tribes through State law
or departmental regulation or arbitrary administrative fiat, but
these trespasses have not impaired the vested legal powers of local
self-government which have been recognized again and again when
these trespasses have been challenged by an Indian tribe. 'Power
and authority rightfully conferred do not necessarily cease to
exist in consequence of long nonuser. . . .' The [IRA], by
affording statutory recognition of these powers of local
self-government and administrative assistance in developing
adequate mechanisms for such government, may reasonably be expected
to end the conditions that have in the past led the Interior
Department and various State agencies to deal with matters that are
properly within the legal competence of the Indian tribes
themselves."
Powers of Indian Tribes, 55 I.D. 14, 28-29 (1934). The
Department noted: "Chief among the powers of sovereignty recognized
as pertaining to an Indian tribe is the power of taxation."
Id. at 46. It would be entirely consistent with the spirit
of the IRA for the Department, and for Congress, to have done away
with the express authorization of state taxation in order to leave
room for Indians to operate
Page 490 U. S. 203
in the sphere of taxation unimpeded by the States. That Indians
had never before asserted the right to freedom from state taxation
was simply a product of the unfortunate state of affairs that the
IRA sought to remedy.
In sum, we are given to choose between two possible
interpretations of the silence of the 1938 Act. One, adopted by the
majority, focuses on the change in this Court's intergovernmental
immunity doctrine which took place at the very end of the process
leading to the 1938 Act. The other focuses on a fundamental change
in congressional Indian policy which took place shortly before the
process began, and was expressly noted as its motivating force. The
latter interpretation is clearly the more compelling. I must
conclude that, contrary to the majority's view, the silence of the
1938 Act is not consistent with a congressional intent that
non-Indian lessees of Indian mineral lands shall be subject to
state taxation for their on-reservation activities. [
Footnote 2/7] This conclusion does not
constitute, as the majority says, a "return to [the] long-discarded
and thoroughly repudiated doctrine" of constitutional
intergovernmental tax immunity.
Ante at
490 U. S. 187.
Rather, it reflects a fuller understanding of the policies
underlying federal Indian law in the mid- to late-1930's and
continuing, in relevant part, into the present time.
II
Even if we did not have such direct evidence of Congress' intent
to preclude state taxation of non-Indian oil production on Indian
lands, that conclusion would be amply supported by a routine
application of the traditional tools of Indian preemption analysis.
The majority concludes otherwise
Page 490 U. S. 204
because it distorts the legal standard it purports to apply.
Instead of engaging in a careful examination of state, tribal, and
federal interests required by our precedents,
see e.g., Ramah
Navajo School Board, Inc. v. Bureau of Revenue of New Mexico,
458 U. S. 832,
458 U. S. 838
(1982), the majority has adopted the principle of "the inexorable
zero."
Teamsters v. United States, 431 U.
S. 324,
431 U. S. 342,
n. 23 (1977). Under the majority's approach, there is no preemption
unless the States are entirely excluded from a sphere of activity
and provide no services to the Indians or to the lessees they seek
to tax. That extreme approach is hardly consistent with the
"flexible" standard the majority purports to apply.
Ante
at
490 U. S.
184.
The Court has identified "two independent but related barriers
to the assertion of state regulatory authority over tribal
reservations."
White Mountain Apache Tribe v. Bracker, 448
U.S. at
448 U. S. 142.
The exercise of state authority may be impermissible solely on the
ground that the state intervention would interfere with "the right
of reservation Indians to make their own laws and be ruled by
them."
Williams v. Lee, 358 U. S. 217,
358 U. S. 220
(1959). Alternatively, state law may be preempted by the existence
of a comprehensive federal regulatory scheme governing the subject
matter.
See, e.g., Warren Trading Post Co. v. Arizona Tax
Comm'n, 380 U. S. 685,
380 U. S.
688-690 (1965). These methods of analysis overlap.
Indian sovereignty is not a "platonic" concept.
McClanahan v.
Arizona State Tax Comm'n, 411 U. S. 164,
411 U. S. 172
(1973). It is a growing tradition, actively supported by federal
legislation. Our preemption cases recognize that "federal law . . .
reflects . . . related federal and tribal interests," and that "the
. . . encouragement of [Indian] sovereignty in congressional Acts
promoting tribal independence and economic development" must inform
our preemption analysis.
Ramah Navajo, 458 U.S. at
458 U. S. 838.
In this case, all the elements that traditionally have resulted in
a finding of federal preemption are present.
Page 490 U. S. 205
Federal regulation of leasing of Indian oil lands "is both
comprehensive and pervasive."
Id. at
458 U. S. 839.
Provisions of the 1938 Act regulate all stages of the process of
oil and gas leasing and production on Indian reservations. The
auction or bidding process through which leases are acquired is
supervised by the Department of the Interior. 25 U.S.C. § 396b.
Successful lessees must furnish a bond to secure compliance with
lease terms, § 396c, and each lessee's operations are in all
respects subject to federal rules and regulations, § 396d.
Longstanding regulations promulgated pursuant to the 1938 Act
govern the minute details of the bidding process, 25 CFR § 211.3
(1988), and give the Secretary of the Interior the power to reject
bids that are not in the best interest of the Indian lessor, §
211.3(b). Federal law sets acreage limitations, § 211.9, the term
of each lease, § 211.10, and royalty rates, methods, and times of
payment, §§ 211.13 and 211.16. Turning to the regulation of the
lessee's operations, federal law controls when operations may
start, § 211.20, and federal supervisory personnel are empowered to
ensure the conservation of resources and prevention of waste, §§
211.19-211.21. Additional restrictions are placed on lessees by the
Federal Oil and Gas Royalty Management Act of 1982, 96 Stat. 2447,
30 U.S.C. § 1701
et seq., which further safeguards tribal
interests by imposing additional inspection, collection, auditing,
security, and conservation requirements on lessees.
In addition, the Jicarilla Apache, as expressly authorized by
their Constitution, have enacted regulations of their own to
supplement federal guidelines, and have created a tribal Oil and
Gas Administration to exercise tribal authority in this area.
[
Footnote 2/8]
See
Jicarilla Apache Tribal Code, Tit. 18, ch. 1, §§ 1-7 (1987), and
their Revised Constitution, Art. XI, § 1(a)(3). Indeed,
Page 490 U. S. 206
just as we earlier found of the Mescalero Apache:
"The Tribe has engaged in a concerted and sustained undertaking
to develop and manage the reservation's . . . resources
specifically for the benefit of its members."
New Mexico v. Mescalero Apache Tribe, 462 U.
S. 324,
462 U. S. 341
(1983).
The majority acknowledges that federal and tribal regulations in
this case are extensive. But because the District Court found that
the State regulates spacing and the mechanical integrity of wells,
and that federal and tribal regulations are therefore not
"exclusive," the majority concludes without further ado that there
is sufficient state activity to support the State's claimed
authority to tax. [
Footnote 2/9]
The majority's reliance on the proposition that "[t]his is not a
case in which the State has had nothing to do with the
on-reservation activity save tax it,"
ante at
490 U. S. 186,
reflects a mechanical and absolutist approach to the delicate issue
of preemption that this Court expressly has repudiated.
White
Mountain Apache, 448 U.S. at
448 U. S. 145.
"[C]omplete abdication or noninvolvement,"
ante at
490 U. S. 185,
has never been the applicable standard.
The taxes the State seeks to impose
"would threaten the overriding federal objective of guaranteeing
Indians that they will 'receive . . . the benefit of whatever
profit [their oil and gas reserves are] capable of yielding,'"
and would "reduc[e] tribal revenues and diminis[h] the
profitability of the enterprise for potential contractors."
White Mountain Apache, 448 U.S. at
448 U. S. 149.
State taxes would also reduce the funds available to oil and gas
producers to meet the financial obligations placed upon them by the
extensive federal and tribal regulatory schemes.
Ibid.
Tribal and federal regulations clearly leave no room for these
taxes.
See id. at
448 U. S. 151, n. 15.
Page 490 U. S. 207
Just as the majority errs by adopting a standard of
"exclusivity," it places undue significance on the fact that the
State made some expenditures that benefited Cotton Petroleum's
on-reservation activities. [
Footnote
2/10] Concededly, the State did spend some money on the
reservation for purposes directly and indirectly related to oil and
gas production. It is clear on this record, however, that the
infrastructure which supports oil and gas production on the
Jicarilla Apache Reservation is provided almost completely by the
federal and tribal governments rather than by the State. Indeed,
the majority appears to accept the fact that the state taxes are
vastly disproportionate,
ante at 185, as well it must:
$89,384 in services, as compared with $2,293,953 in taxes, speaks
for itself. [
Footnote 2/11] But
the majority deems this fact legally irrelevant in order to
Page 490 U. S. 208
avoid imposing a "proportionality requirement" that would be
inconsistent with the notion that taxation is not based on a
quid pro quo. Ante at
490 U. S. 185,
n.
15 That notion, drawn
from Due Process and Commerce Clause analysis,
see ante at
490 U. S.
189-190, is inapposite in the preemption context.
Preemption analysis calls for a close consideration of conflicting
interests and of their potential impact on one another. Under the
majority's analysis, insignificant state expenditures, reflecting
minimal state interests, are sufficient to support state
interference with significant federal and tribal interests. The
exclusion of all sense of proportion has led to a result that is
antithetical to the concerns that animate our Indian preemption
jurisprudence.
Finally, the majority sorely underestimates the degree to which
state taxation of oil and gas production adversely affects the
interests of the Jicarilla Apache. Assuming that the Tribe
continues to tax oil and gas production at present levels,
on-reservation taxes will remain 75% higher (14% as opposed to 8%
of gross value) than off-reservation taxes within the State. The
state trial court was not disturbed by this fact: it found that
Cotton Petroleum had plans to dig new wells, and took that to be
proof positive that the taxes imposed by the State did not deter
drilling. But the court failed to recognize that Cotton Petroleum's
new wells were infield (or "infill") wells, drilled between
existing producing wells to increase the efficiency of drainage on
lands already leased. Tr. 41-42, 68;
see H. Williams &
C. Meyers, Oil and Gas Terms 468 (7th ed.1987). An infill well is
essentially a no-risk proposition, in that there is little doubt
that the well will be productive. Therefore, Cotton Petroleum's
willingness to drill infill wells does not reflect its willingness
to develop new lands. Federal and tribal interests legitimately
include long-term planning for development of lease revenues on new
lands, where there is greater economic risk,
see Tr. 450,
and a greater probability that difference in tax rates will have an
adverse effect on a producer's willingness to drill new wells and
on the competitiveness of Jicarilla
Page 490 U. S. 209
leases.
Id. at 68, 504.
"[B]oth the rate at which mining companies acquire Indian land
leases and the rate at which they develop them are dependent on the
future balance between the deterrents to and the advantages of
Indian land leasing. Where the balance will be struck cannot be
predicted, for there are simply too many variables involved."
Federal Trade Commission, Staff Report on Mineral Leasing on
Indian Lands 48 (1975) (FTC Report). Dual state and tribal taxation
inevitably affects that balance.
In weighing the effect of state taxation on tribal interests,
logic dictates that it is necessary not only to consider the size
of the tax, but also the importance of the taxed activity to the
tribal economy.
See California v. Cabazon Band of Mission
Indians, 480 U. S. 202,
480 U. S. 218
(1987) (noting, in invalidating state regulation of tribal bingo
operations, that bingo games constituted the sole source of tribal
income). In this case, too, it is undisputed that oil and gas
production is the Jicarilla Apache economy -- a common pattern in
reservations with substantial oil and gas reserves.
See
Tr. 159 (oil and gas royalties account for 90% of tribal income);
FTC Report at 10; Anders, Indians, Energy, and Economic
Development, 9 J. Contemp. Business 57 (1980).
Furthermore, where, as here, the Tribe has made the decision to
tax oil and gas producers, the long-term impact of state taxation
on the Tribe's freedom of action in the sphere of taxation must
also be considered. [
Footnote
2/12] Tribal taxation has been widely perceived as necessary to
protect Indian interests. [
Footnote
2/13] The fact that the Jicarilla Apache have seen fit to
impose their own taxes renders the threat to tribal interests
Page 490 U. S. 210
which is always inherent in state taxation all the more
apparent. [
Footnote 2/14] The
market can bear only so much taxation, and it is inevitable that a
point will be reached at which the State's taxes will impose a
ceiling on tribal tax revenues. That the Jicarilla Apache have not
yet raised their taxes to a level at which the combined effect of
tribal and state taxation has been proved to diminish tribal
revenues cannot be dispositive. Our decisions have never required a
case-specific showing that state taxation in fact has deterred
tribal activity; the potential for conflict is sufficient.
The majority observes that this is not "a case in which an
unusually large state tax has imposed a substantial burden on the
Tribe,"
ante at
490 U. S. 186,
and deems the tribal interest "indirect and . . . insubstantial,"
ante at
490 U. S. 187.
But the majority does not explain why interferences with federal
policy of only the dramatic magnitude of the tax at issue in
Montana v. Crow Tribe, 484 U.S. 997 (1988), meet the
preemption threshold. In
Warren Trading Post Co. v. Arizona Tax
Comm'n, 380 U.S. at
380 U. S. 691,
the Court rejected a 2% tax on the gross proceeds of a non-Indian
trader on an Indian reservation because it put
"financial burdens on [the trader] or the Indians . . . in
addition to those Congress or the tribes have prescribed, and could
thereby disturb and disarrange the statutory plan Congress set up
in order to protect Indians."
Indeed, the dissenters in
White Mountain Apache
characterized the less-than-1% tax struck down in that case
Page 490 U. S. 211
as "relatively trivial" and "unlikely to have a serious adverse
impact on the tribal business," 448 U.S. at
448 U. S. 159
(STEVENS, J., dissenting). That the tax burden was held sufficient
to support a finding of preemption in
White Mountain
Apache and
Warren Trading Post undermines the
majority's position here.
III
In sum, under established Indian preemption principles, the case
before us should have been straightforward. We deal here with state
taxes on oil producers engaged in the development of the natural
resource upon which the economic future of the Jicarilla Apache
depends. The federal statute governing the producers' activities,
unlike its historical predecessors, contains no express
authorization of state taxation. That statute was enacted in a
period in which concern with tribal sovereignty and tribal
self-sufficiency was at the very core of federal Indian policy.
Pursuant to that statute, the Federal Government regulates every
aspect of the producers' activities to advance the Indians' best
interests. The statute also encourages tribes to assert their own
sovereign authority in this area; the Jicarilla Apache have done so
through regulation and taxation. On the other side of the balance,
New Mexico asserts little more than a desire to increase its
general revenues at the expense of tribal economic development.
That purpose
"is insufficient to justify the additional burdens imposed by
the tax on the comprehensive federal scheme . . . and on the
express federal policy of encouraging Indian self-sufficiency in
[this] area."
Ramah Navajo, 458 U.S. at
458 U. S.
845.
I respectfully dissent.
[
Footnote 2/1]
The Court today addresses, in addition to preemption, the
question whether the Interstate Commerce Clause applies to problems
of multiple state and Indian taxation. I agree with the majority's
conclusion in Part V of its opinion that an Indian tribe is not to
be equated with a State for purposes of the Interstate Commerce
Clause. It would seem to follow that the Clause has no application
to this case. I thus see no purpose in the majority's detailed
application of Interstate Commerce Clause analysis in Part IV of
its opinion.
[
Footnote 2/2]
The Blackfeet Reservation is a treaty reservation. In contrast,
the Jicarilla Apache Reservation was created by Executive Order
dated February 11, 1887.
See 1 C. Kappler, Indian Affairs,
Laws and Treaties 875 (1904). Congress enacted legislation in 1927
to govern oil and gas leasing of lands on Executive Order
reservations. Indian Oil Act of 1927, ch. 299, § 1
et seq.
44 Stat. 1347,
codified at 25 U.S.C. § 398a
et
seq. (1927 Act). The 1927 Act, like the 1924 Act, contained a
taxation provision: it gave States the power to tax
"improvements, output of mines or oil and gas wells, or other
rights, property, or assets of any lessee upon lands within
Executive Order Indian reservations in the same manner as such
taxes are otherwise levied or collected."
§ 398c.
[
Footnote 2/3]
The 1938 Act began to take form in 1935 and 1936.
See,
e.g., 79 Cong.Rec. 7815 (1935) (concerning S. 2638). From the
beginning, this legislation was drafted and promoted by the
Department of the Interior, and the Department stated that the
intent of the proposed legislation was to harmonize federal leasing
law with the IRA "and the policy of the Government thereunder for
the organization and rehabilitation of Indian tribes and tribal
matters." Letter dated March 26, 1936, regarding S. 2638, from
Secretary Harold L. Ickes to Rep. Will Rogers, Chairman of the
House Committee on Indian Affairs,
reprinted in App. to
Brief for Petitioners in
Montana v. Blackfeet Tribe, O.T.
1983, No. 83-2161, p. 6.
[
Footnote 2/4]
The inference the majority seeks to draw from the chronology of
the 1938 Act is further weakened by an analysis of
Mountain
Producers itself. That case concerned federal taxation of
income received by a private developer from an oil and gas lease of
land owned by the State of Wyoming. In holding that the tax on the
lessee's profits was not barred by the intergovernmental tax
immunity, the Court expressly overruled
Gillespie.
See 303 U.S. at
303 U. S. 387.
Both
Gillespie and
Mountain Producers concerned
income taxes. It took 10 more years for the Court to reject the
application of the intergovernmental immunity doctrine to state
gross production and excise taxes on oil produced by non-Indian
lessees from leased Indian lands, and to overrule a line of
pre-1938 decisions to the contrary.
See Oklahoma Tax Comm'n v.
Texas Co., 336 U. S. 342,
336 U. S. 367
(1949). Even if Congress had considered
Mountain Producers
in enacting a bill that was silent as to state taxation, it would
have been the prudent course for Congress, in view of the continued
uncertainty of the law, to have used express language had it wished
to perpetuate state tax authority.
[
Footnote 2/5]
The majority correctly notes,
ante at 178-180, that the
Department of the Interior, in proposing this legislation, advised
Congress of the need to change particular technical rules which had
made Indian lands less favorable for mining than federal public
lands. But those comments in the Department's transmittal letter to
Congress do not support the view put forth by the majority that the
sole purpose of the 1938 Act was to achieve parity in that
respect.
[
Footnote 2/6]
The compromise, as implemented, permitted the States to tax the
producers of oil and gas, and freed the States to use those
proceeds in any manner they chose, with no requirement that the
taxes be used to benefit either Indians or reservation activities.
See S.Rep. No. 768, 69th Cong., 1st Sess., 6 (1926).
[
Footnote 2/7]
Even if the silence of the 1938 Act simply were held to be
ambiguous, our precedents consistently have required that
ambiguities in statutes affecting tribal interests be resolved in
favor of Indian independence.
Ramah Navajo School Board, Inc.
v. Bureau of Revenue of New Mexico, 458 U.
S. 832,
458 U. S. 838
(1982);
White Mountain Apache Tribe v. Bracker,
448 U. S. 136,
448 U. S.
143-144 (1980). That canon of interpretation would
require rejecting the conclusion the majority reaches here.
[
Footnote 2/8]
Tribal regulation is expressly contemplated by regulations
promulgated under the 1938 Act, which specify that certain
statutory and regulatory provisions "may be superseded by the
provisions" of tribal law enacted pursuant to the IRA. 25 CFR §
211.29 (1988).
[
Footnote 2/9]
The manner in which a State exercises a regulatory role in the
area of well spacing indeed underscores the comprehensiveness of
federal law in this area: state law applies not of its own force,
but only if its application is approved by the Bureau of Land
Management. Furthermore, additional federal spacing requirements
apply to Indian lands.
See 43 CFR §§ 3162.3-1(a) and (b)
(1987).
[
Footnote 2/10]
To the extent that the majority relies on services provided to
members of the Tribe or on off-reservation services provided to
Cotton Petroleum,
see ante at
490 U. S. 185,
490 U. S. 189,
those expenditures are not relevant under our precedents. We held
in
Ramah Navajo that services provided to a contractor off
the reservation are "not a legitimate justification" for taxing
on-reservation activity, because
"[p]resumably, the state tax revenues derived from [the
contractor's] off-reservation business activities are adequate to
reimburse the State for the services it provides."
458 U.S. at
458 U. S. 844,
and n. 9. In that case, we also considered and rejected
off-reservation services to members of the Tribe as a basis for
state taxation. We were
"unpersuaded by the State's argument that the significant
services it provides to the Ramah Navajo Indians justify the
imposition of this tax. The State does not suggest that these
benefits are in any way related to [the on-reservation activity the
State seeks to tax]."
Id. at
458 U. S. 845,
n. 10.
[
Footnote 2/11]
The distribution of responsibility is even clearly reflected in
the relevant oil-and-gas-related expenditures during the 5-year
period at issue in this case: federal expenditures were $1,206,800;
tribal expenditures were $736,358; the State spent, at most,
$89,384. Brief for Jicarilla Apache Tribe as
Amicus Curiae
10-11, n. 8. In any event, it is clear from this Court's rejection
of the
Montana severance tax at issue in
Montana v.
Crow Tribe, 484 U.S. 997 (1988), that the mere fact that the
State has made some expenditures that benefit the taxed activities
is not sufficient to avoid a finding of preemption.
See
Motion to Affirm for United States in
Montana v. Crow
Tribe, O.T. 1987, No. 87-343, p. 21 (Montana spent $500,000 to
pay 25% of the cost of a road used by employees and suppliers of a
mine).
[
Footnote 2/12]
The decision to impose tribal taxes was approved by the Federal
Government.
See Merrion v. Jicarilla Apache Tribe,
455 U. S. 130,
455 U. S. 136
(1982).
[
Footnote 2/13]
See, e.g., Snipp, American Indians and Natural Resource
Development, 45 Am.J.Econ. & Soc. 457, 468 (1986); 1 American
Indian Policy Review Commission, Final Report 339, 342, 343-344,
347 (1977) (concluding that state taxes on lessees lower Indian
royalties and interfere with Indian taxation); Task Force Seven,
Reservation and Resource Development and Protection, Final Report
to the American Indian Policy Review Commission 139, 143, 145
(Comm. Print 1976).
[
Footnote 2/14]
Although this Court ruled in
Washington v. Confederated
Tribes of Colville Indian Reservation, 447 U.
S. 134 (1980), that the mere fact of Indian taxation
does not oust a State's power to tax, this Court clearly relied in
Colville on the fact that value generated by the activity
there at issue (smokeshops) was not developed on the reservation by
activities in which the Tribe had an interest. We observed in
Colville that the Tribe was basically importing goods and
marketing its tax immunity.
Id. at
447 U. S. 155.
That is not so here. Indeed, our decision in
Colville
expressly left open the possibility that "the Tribes themselves
could perhaps preempt state taxation through the exercise of
properly delegated federal power to do so."
Id. at
447 U. S.
156.